Tongaat — a ticking time bomb set to go off in April

The clock is ticking for embattled sugar giant Tongaat Hulett and the hundreds of thousands of people who depend on it. The company has two critical deadlines looming in April: the opening of its mills, and a court case to determine whether the company is placed in provisional liquidation.

The winding-up application, brought by business rescue practitioners (BRPs), will be argued in the KZN Division of the High Court in Durban on Thursday, 16 and Friday, 17 April.

Unless the matter is resolved by consent, judgment might be reserved for weeks or even months.

In the meantime, sugarcane — which must be processed soon after harvesting — needs to be delivered to Tongaat’s mills, but most of the company’s bank accounts have been frozen due to the liquidation application.

Thomas Funke, the CEO of SA Canegrowers, which represents 27,000 small-scale and 1,100 large-scale growers, told GroundUp: “Although there is still hope that a negotiated solution may be found to avoid liquidation completely, we are also hoping to ensure that if a liquidation does proceed, it would at least be a funded liquidation which would allow operations to continue.”

As of this moment, Tongaat Hulett’s mills and refinery are in an operational condition, he said. “The mills were being prepared for the 2025/26 season when the application for provisional liquidation was lodged by the business rescue practitioners.

“All parties involved understand what is at stake should Tongaat Hulett face an unfunded liquidation or even temporary stoppage of work: the majority of South Africa’s small- and large-scale sugarcane growers will immediately lose market access, leading to devastating income and job losses in rural KwaZulu-Natal.

“With a little over a month to go until the liquidation hearing, everything is being done to avert such an outcome,” said Funke.

Application opposed

The liquidation application is being opposed by several parties, including the canegrowers, Minister of Trade and Industry Parks Tau and the Industrial Development Corporation (IDC), which provided R2.3-billion in post-commencement funding.

Questions have been raised about the conduct of the BRPs, including the fees charged during their three-year appointment, and how the Vision Group could scupper the preferred rescue plan, triggering the current crisis.

The Vision Group acquired the loans held by the lender group, making it the controlling creditor and effectively giving it the voting power to approve its own rescue plan.

Late last year, the BRPs approached the IDC for a further R600-million to tide the company over until the Vision deal was concluded. But the IDC said Vision should contribute at least R200-million.

Vision refused. The rescue plan lapsed, and the company entered the current crisis.

Some creditors have questioned the legality of the lender group transaction with Vision. They are demanding a full investigation, amid allegations that Vision may not have paid for the loans. They also believe the transaction was not legally concluded when the business rescue plan was voted on in January 2024.

In their latest affidavit, however, the BRPs maintained they acted lawfully throughout the process.

They said that while they are aware of the potentially devastating consequences of liquidation, their options are limited. They added that although the IDC expressed “speculative optimism”, it had not committed to providing more funding.

“The objective facts are that the adopted plan has failed, sale agreements have lapsed, the conditions have not been fulfilled.

“Vision has refused IDC’s proposals and has issued a demand for the payment of R11.7-billion [the lender group’s claim],” said BRP Gerhard Albertyn in his latest affidavit.

“The IDC portraying itself as the proverbial ‘white knight’, is nothing more than smoke and mirrors. At the time of deposing to this affidavit, there is no funding that will enable the company to conduct business, even in business rescue, beyond the end of this month.”

Albertyn said the BRPs had considered the consequences of liquidation. But, he said, there were no reasonable prospects of rescue.

The BRPs blame Vision for their failure, saying it undermined the rescue plan by introducing new conditions, such as reforms to the sugar industry.

Vision, they noted, neither opposes nor supports the liquidation application. Yet as the controlling creditor, its cooperation is essential to any restructuring if the company is to continue in business rescue.

“Only a few hours prior to me deposing to this affidavit. Vision continues to frustrate genuine ongoing efforts by the BRPs to responsibly manage Tongaat’s affairs,” said Albertyn.

Responding to the minister’s affidavit, Albertyn said Tau’s intervention would have been “more constructive and certainly welcome” had it come before the liquidation application was launched. DM

Originally published by GroundUp.